The two-step phase-shifting algorithm proposed previously is optimized, the original object wave field can be reconstructed by only one phase shift value in (0, π) and two interferograms, with the removal (or suppression) of background intensity (or dc term), and the additional measurements such as the object wave intensity, reference wave intensity, etc., are no longer required. Together with double random phase encoding technique in the Fresnel domain, the optimized two-step phase-shifting algorithm is then applied to image encryption system. The feasibility of the proposed scheme is verified by computer simulation. Furthermore, the sensitivity of geometrical keys has also been tested and analyzed.